According to yesterday’s data, sales of new homes in the USA have increased by 16.6% in April against the value of the previous month and the forecast of +2.0%. The sales has reached 619 000 homes a year, which was the highest rate in the past 8 years.
Increasing home sales boosts the rise in the manufacturing and service sectors and labor market. Positive data on the housing market also increase the belief that the US Fed will raise interest rate in June.
USD index Wall Street Journal, which shows exchange rate of the USD against the basket of 16 major currencies, has grown by 0.2% on Tuesday. According to CME Group, futures for the interest rates shows 38% probability of the rate hike in June versus 30% on Monday.
US data released last week showed sharp decline in the initial applications for unemployment benefits last week. This was the highest decline since the beginning of February, which indicates improvements in the US labor market. This is another fact in favor of the interest rate increase in June. US Fed executives gave to understand that the rise in rates would be possible in case of improvements in the economic situation in the country.
Fed President of Philadelphia, Mr. Patrick Harker said on Monday that the Fed might raise rates three times this year, and the increase could begin at the next meeting of the Bank in June. Due to expectations of interest rate hike in the U.S. in June, the USD will continue to strengthen in the financial markets, while the price of gold will decline.
Higher interest rates usually put pressure on gold, as the costs of borrowing for its acquisition and storage are growing, and gold cannot compete with more profitable and safer instruments, such as Treasury bonds.
Market participants are waiting for the speech by Janet Yellen on Friday (16:30 GMT+2). If her comments confirm probability of tightening policy by the US Fed, it will provide support the USD in the financial market and at the same time put additional pressure on gold prices, which will continue until 15 June, when US Fed interest rate decision will be known.